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Born in Scotland 2 years before the creation of the United Kingdom of Great Britain, Campbell inherited the peerage on the death of his father in 1731, becoming Lord Loudoun. The earl raised a regiment of infantry that took part in the Jacobite Rising of 1745 on the side of the Hanoverian government. The regiment consisted of twelve companies, with Loudoun as colonel and John Campbell (later 5th Duke of Argyll) as lieutenant colonel. The regiment was raised and served in several different parts of Scotland; three of the twelve companies, raised in the south, were captured at Prestonpans. Eight companies, under the personal command of Lord Loudoun, were stationed in Inverness. Loudoun set out in February 1746 with this portion of his regiment and several of the Independent Companies in an attempt to capture the Jacobite pretender, Prince Charles Edward Stuart. The expedition was ignominiously defeated by a small number of Jacobites in what became known as the Rout of Moy. After this debacle, Loudoun fell back to join the Duke of Cumberland's army, giving up the town of Inverness to the rebels.

In 1756, Loudoun was sent to North America as Commander-in-Chief and Governor General of Virginia, where he was unpopular with many of the colonial leaders. When he learned that some merchants were still trading with the French, while he was trying to fight a war against them, he temporarilly closed all American ports. Despite his unpopularity the county of Loudoun, formed from Fairfax in 1757, was named in his honour.[1] As Commander-in-Chief, he planned an expedition to seize Louisbourg from the French in 1757 but called it off when intelligence (possibly including a French military deception) indicated that the French forces there were too strong for him to defeat. While Loudoun was thus engaged in Canada, French forces captured Fort William Henry from the British, and Loudoun was replaced by James Abercrombie and returned to London.

Many Historians debate whether he played a fundamental part in the Seven Years War as arguably, he was an influential figure embarking on reforms for the army such as replacing the musket with the flintlock musket for greater accuracy. He made improvements by embarking on a road improvement programme, recognising the need to supply the army as he replaced the traditional supply line with army wagons. His focus was centralising the system of supplies and had built storehouses in Halifax and Albany, whilst recognising the importance of waterways as a means of transport. Most notably, he integrated regular troops with local militias-and the irregulars were to fight a different kind of war, than the linear, European style of warfare in which the British had previously been trained.

In 1762, he was sent to Portugal to counter the Spanish invasion of Portugal as second-in-command, and he became overall commander in 1763. Despite being unable to prevent the loss of Almeida, the British forces soon launched a counter-attack that drove the invaders back across the border.